Automatic minimum wage hikes proposed

AUGUST, Maine — In a move denounced by the business community, Maine’s minimum wage would go up every year based on the increase in the consumer price index under a measure now before lawmakers.

“There have been a number of states in the country that have done this,” said Rep. John Tuttle, D-Sanford, House chairman of the Legislature’s Labor Committee and sponsor of the bill. “This is a more efficient method of addressing the need of a minimum wage, particularly given difficult economic times.”

He said several constituents had approached him about sponsoring an increase in the minimum wage, both through tying it to the consumer price index and through a fixed increase. Maine’s minimum wage went up to $7.25 an hour last October and will go up to $7.50 an hour on Oct. 1, 2009.

“I think this is a better way to handle the issue of setting the minimum than having a debate whether another 50 cents an hour is what is needed, or is it 25 cents an hour?” he said.

The proposal would have the Maine Department of Labor set the minimum wage every year on Jan. 1 starting in 2010 based on the federal Bureau of Labor Statistics’ consumer price index.

“This will give folks on the minimum wage a needed increase every year,” said Ed Gorham, president of the Maine AFL-CIO. “They will know they will be getting some increase to help pay for increased costs without waiting for the Legislature to act.”

Gorham said in the current recession, the minimum wage can help bolster the overall economy because that money will be spent and that will help everyone.

“It’s the rising tide that floats all boats,” he said. “This will help Maine’s economy.”

But some in the business community see any increase in the minimum wage as a drag on the economy. Chris Hall, executive vice president of the Portland Regional Chamber, said lawmakers should not give up their responsibility to weigh current economic conditions and set a wage based on reasoned judgment.

“I know it sounds attractive in the short term,” he said. “The consumer price index is an unknown, and unknowns are a real danger to business planning.”

Hall said he remembers in the 1980s when the index was increasing by double-digit percentages. He said if the Legislature put the wage increase on “autopilot,” businesses could be hit with large increases before lawmakers could address the issue.

“When we can afford an increase, we can put one in law,” he said,” but something like the CPI is a big unknown.”

David Clough, Maine director of the National Federation of Independent Businesses, said many businesses simply cannot afford any increase in their cost of doing business in a recession. He said the increase already in law for next October will hurt many small businesses.

“It takes money out of the pockets of businesses,” he said. “So when all is said and done, particularly in this economy, to have a high minimum wage hurts Maine’s economy.”

Clough said supporters of increasing the minimum wage always stress that those on minimum wage will spend the increase and help the economy, but they don’t acknowledge that money is coming from a business which can’t use that cash for something else, such as investing in business expansion.

Gorham said opponents of minimum wage increases always make that argument, but he said there are several studies that show every increase in the minimum wage has resulted in greater economic activity.

“We are ready to respond to that argument, like we have in the past,” he said. “An increase is good for the economy.”

Hall said another concern employers have with the measure is the “ripple effect” of every increase in the minimum wage.

“It’s not just the cost of the increase,” he said. “It is that other employees will see the size of the increase of the minimum wage increase and ask for that increase as well. That can add up quickly.”

The Department of Labor estimates there were 20,000 Mainers paid the minimum wage two years ago, including both full- and part-time workers. Most work in food preparation jobs and in the lodging industry.

Maine and New Hampshire currently have the lowest minimum wage in New England. Connecticut, Massachusetts and Vermont are at $8 an hour and Rhode Island at $7.40 an hour. Maine’s first minimum wage — in 1959 — was $1 an hour.